A Phillips Affair

Ever since its inception in 1991, Minneapolis's Neighborhood Revitalization Program has been plagued by reports of infighting, dueling agendas, and a less than democratic process. With real money at stake, neighborhood politics has become vicious at times; two groups--Whittier and Longfellow--have imploded since the program began. Now the organization representing the city's largest neighborhood, People of Phillips, is embroiled in a controversy that has some residents pushing to have the group dissolved. There have been allegations of racism, insubordination, contract improprieties, and a purported conflict of interest with the Minneapolis Community Development Agency.

Much of the fight centers around the neighborhood's housing organization, the Housing Resource Clearinghouse of Phillips (HRCP). A subsidiary of People of Phillips overseen by its own board of directors, HRCP is charged with everything from lead-removal programs to rehabilitating older houses. Last November, its board decided to add a project to help neighborhood renters buy homes. It voted to contract with Neighbors Helping Neighbors (NHN), an organization run by Phillips resident and real-estate agent Corrine Zala. Ten buyers would receive a $5,000 grant each for acquisition, closing, and rehabilitation costs. Zala would be paid an $18,000 fee.

Zala began to work with prospective homeowners in December, but when January and February passed without a signed contract, she became concerned. She queried Doc Davis, HRCP's executive director, and was assured that a contract was in the works.

In March 1996, Zala sent a letter to Davis stating that she hadn't received the $50,000 for her ten clients, and that delays could jeopardize some of the purchase agreements. When she still had not received the money by April, she turned to the HRCP board, which authorized emergency funding for the homeownership project. The board told Zala to go ahead with the closings, and promised to hammer out a contract with her down the road.

That was in early April. On April 24, Zala received a memo from Davis requesting information about her fees and invoices for the ten transactions. He also stated that the money would be released on May 6. As she now had a promise in writing, Zala set the closing dates. On May 10, Zala went to the HRCP office to pick up the $50,000 for the buyers. Instead, Davis "gave me a long speech about how $50,000 was a lot of money, and that he was only going to give me $25,000," Zala says.

Zala maintains Davis then presented her with another obstacle. "He told me, for the first time ever, that the MCDA and HRCP required an additional 'soft' mortgage attached to the properties. A number of homes had already gone through the review process--lenders had been confirmed, forms had been filed--and some had already closed," says Zala. While it's not unusual for homes to have a second mortgage, Zala says that adding one at this late date was problematic.

While Zala was struggling to close on the homes, the HRCP board was grappling with a new problem. As public monies are dispersed by neighborhood housing organizations, contract managers are assigned by the MCDA. One of the managers supervising HRCP was Edie Oates, who has also been serving as a technical assistant to the program. And at some point within the past year Oates and Davis's professional relationship evolved into an intimate one. Some board members considered this a conflict of interest and worried about whose interests Davis was serving; they also became increasingly critical of Oates. At a recent public meeting, board member Bob Albee accused Oates of "deliberately monkeywrenching the process."

According to Mike Norton, a Minneapolis city attorney, the guidelines for determining conflict of interest for unmarried couples are hazy at best. "Generally, if someone has a professional relationship where they could benefit personally, you are required to disclose the relationship," he says. The issue hit the headlines last year, when City Council members pointed out that Council President Jackie Cherryhomes was dating an attorney who did business with the city, and on whose contracts she had voted. The couple is now engaged, and the City Council never did pass standards for dealing with similar situations. "It's a huge grey area," says Norton.

HRCP board members say they asked the MCDA to remove Oates from projects involving Phillips for months, but got nowhere. Member-at-large Carol Pass claims that she personally raised the issue to Oates' supervisor, Earl Pettiford, and MCDA attorney Reuben Acosta. (Pettiford, Davis, and Oates refuse to comment on the either the length or nature of the involvement.) Pass says she finally brought her concern to MCDA executive director Rebecca Yanisch, and she says Yanisch told her she would take Oates off the HRCP assignment. Yanisch says she "never had such a conversation."

Yanisch did, however, write a letter to the HRCP board chair, Shada Buyobe-Hammond, in which she expressed concern with "the level of personal finger-pointing at Edie... I am fully aware of the personal relationship Edie has with your Executive Director. It has been fully disclosed as required by our policies." (When that disclosure took place isn't clear. In early September, Yanisch told CP that Oates had told her "a few weeks ago," right around the time the controversy started boiling over in Phillips. Oates has been working with HRCP for at least a year.) Yanisch said Oates would continue as contract manager for HRCP, but added that in addition, Pettiford would be asked to "take a more active day-to-day role in our relationship with HRCP."

Meanwhile, some HRCP board members have begun trying to remove Davis from his position. As of this writing, there were still just under $10,000 in NHN program funds that had not been disbursed; the board also had not yet seen a full accounting of HRCP monies despite asking for the information numerous times. "The accountant has never shown up at meetings. We have no idea how much money has been spent or where it went," one member said at a public meeting. Davis did not respond directly to that challenge, but told the board that all the money was accounted for.

Generally, Davis raises a series of objections about HRCP's involvement with NHN. He claims that the board erred in giving Zala the contract without competitive bidding, and that she didn't complete government forms properly. He also says Zala's fees are too high and has proposed that HRCP hire an in-house realtor--an action board members say is prohibited by their bylaws. Zala, for her part, says it was Davis who first recruited her for the program, that they developed its budget together, and that Davis promised he'd guide her through the public-sector requirements. "Whenever I would ask Doc about anything, budgets or contracts, he would say everything was fine," she says.

By late August, things were hitting the fan. An emergency meeting was called for August 24 to remove Davis and HRCP's chair, Shada Buyobe-Hammond, who the board claims also didn't follow its directives. "We are justified in these dismissals," says board member Jennifer Naglak. "The executive director's inactions have caused board members to work full-time to clear up these problems."

Board members' most recent complaint is that Davis and Oates opened a HRCP savings account without board approval, apparently to hold the disputed funds. Yanisch, who learned of the action from HRCP board members, says she told Oates she used "poor judgement" in attaching her name to a HRCP account. Yanisch says no transactions took place during the time Oates was a co-signer on the account.

Throughout the controversy, Naglak and others have insisted that the issue is one of insubordination and competency. But others suspect, as board member Vincent Cotton puts it, "that something else is going on." Discussions regularly split members along racial lines; about half of the members are black, and so are Buyobe-Hammond and Davis. Several board members of color have called the controversy a witch-hunt, and Davis agrees. He says it was his critics who brought race into the picture by "making it clear that this nice white woman could do whatever she wanted to with this money, while residents and people of color don't have access [to funds]." Zala objects to that characterization, noting that more than half of the families NHN has placed are people of color--a figure she says reflects the composition of the neighborhood.

When the HRCP board voted at the August 24 meeting on whether or not to retain Davis it was split seven-seven. A subsequent vote yielded the same result, and in the end, the board decided to put Davis on six months' probation and provide him with "additional administrative assistance." But it was an uneasy resolution for both sides that has done little to ease the friction among board members and in the neighborhood. Last week, members of one of the four district councils that govern PoP passed a resolution to have Oates removed from supervising HRCP, citing her now public relationship with Davis. Other councils may do the same, hoping to increase the pressure on the MCDA.

MCDA officials, however, consider the debate over. "This is much ado about nothing," says Pettiford. "There is no question as far as the banks and accounts are concerned. And a contract has been drafted by MCDA attorneys for NHN that specifies what documentation needs to be provided so payment can be made." As for Oates's professional performance, both Pettiford and Yanisch stand behind their co-worker. "She has acted in a highly professional manner and I'm satisfied with the job she's done," says Yanisch.

As for Zala--who, incidentally, still hasn't been paid--she says the experience has been "a mess," costing her a year's worth of real-estate work and some clients the homes they'd wanted. In some cases, she says, it took her lending her own money to have closings go through. In others, the deals simply dissolved. This week, Zala says, one woman might become homeless as a result of the delays. Yet she continues to get calls from Phillips residents wanting to get into the program. Chances are they'll be on a waiting list for some time.